REQUEST FOR ARBITRATION
Filed Pursuant to Article 36 of the Convention on the Settlement of Investment Disputes Between States and Nationals of Other States (the "ICSID Convention")
INTERNATIONAL CENTRE FOR SETTLEMENT OF INVESTMENT DISPUTES
DUNMORE ENERGY HOLDINGS LTD.
Claimant
v.
REPUBLIC OF VALDERIA
Respondent
ICSID Case No. ARB/22/11
Date of Filing: March 15, 2022
Submitted by:
Calderwood & Harkness LLP 55 Bishopsgate London EC2N 3AH United Kingdom
On behalf of Dunmore Energy Holdings Ltd.
Counsel of Record:
Vivienne St. Claire — Responsible Partner Robert Adeyemi — Billing Partner Jeffrey Park — Lead Associate Audrey Zhou — Working Associate
Matter Reference: 1016-00002
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I. INTRODUCTION
1. Dunmore Energy Holdings Ltd. ("DEH" or the "Claimant"), an exempted company incorporated under the laws of the Cayman Islands, hereby submits this Request for Arbitration (the "Request") to the International Centre for Settlement of Investment Disputes ("ICSID" or the "Centre") pursuant to Article 36 of the Convention on the Settlement of Investment Disputes Between States and Nationals of Other States (the "ICSID Convention") against the Republic of Valderia ("Valderia" or the "Respondent").
2. This Request arises from the unlawful expropriation by the Republic of Valderia of the Claimant's substantial oil and gas investment in the Valderian Orinoco Basin. Specifically, through a coordinated series of presidential decrees and ministerial resolutions issued between April and August 2021, Valderia unlawfully expropriated the Claimant's 30-year oil and gas concession — Concession No. HYD-2012-047, known as Bloque Orinoco Sur — without payment of any compensation whatsoever. These measures were taken in flagrant violation of the Agreement Between the Government of the United Kingdom of Great Britain and Northern Ireland and the Government of the Republic of Valderia for the Promotion and Protection of Investments, signed May 22, 2006, and entered into force November 1, 2006 (the "UK-Valderia BIT" or the "Treaty").
3. The Claimant seeks compensation in the total amount of USD 867,000,000 (eight hundred sixty-seven million United States dollars), comprising the following elements:
(a) USD 347,000,000 in sunk capital expenditure, representing the total capital investment made by DEH in the Valderian concession between 2014 and 2021, which was rendered valueless by the Respondent's expropriatory measures;
(b) USD 312,000,000 in lost future profits, calculated on a discounted cash-flow ("DCF") basis over the remaining approximately 23-year term of the concession; and
(c) USD 208,000,000 in consequential damages, including financing costs arising from the technical default on the Claimant's project finance facility, reputational harm, and sunk expenditure on a Phase II renewable energy development component.
4. Bloque Orinoco Sur encompasses an area of 1,240 km² in the Valderian Orinoco Basin (onshore). The concession was granted by the Ministry of Energy and Natural Resources of the Republic of Valderia on September 12, 2013, for a term of 30 years expiring on September 12, 2043. At the time of the expropriation, approximately 23 years of the concession term remained. The concession represented a highly valuable, commercially productive hydrocarbon asset, with proved reserves of 87.4 million barrels of oil equivalent as independently certified by Ridgewell Subsurface Consultants Ltd.
5. Between 2014 and 2021, DEH invested approximately USD 347 million in total capital expenditure to explore, develop, and bring the concession into commercial production. This investment encompassed extensive seismic acquisition campaigns, the drilling of seven exploration wells and twenty-two development wells, the construction of a 68-kilometer gathering pipeline, and the construction and commissioning of a central processing facility ("CPF Orinoco Sur") with a design capacity of 35,000 barrels per day. By 2020, the concession had reached peak production of 24,800 barrels per day and was generating gross annual revenue in excess of USD 128 million.
6. The Respondent's expropriatory measures culminated in the physical occupation of the Claimant's central processing facility by Valderian military personnel and employees of PetroValderia S.A. ("PetroValderia"), the 100% state-owned national oil company of the Republic of Valderia. Following this occupation, PetroValderia assumed full operational control of the concession assets, and DEH and its subsidiary's personnel were forcibly denied access to the facility and the concession area. The Respondent subsequently issued a further presidential decree formally transferring the concession rights from the Claimant's Valderian subsidiary to PetroValderia, and the Ministry of Energy and Natural Resources issued a ministerial resolution revoking the Claimant's operating licenses.
7. No compensation of any kind has been offered, tendered, or paid by the Republic of Valderia in connection with these measures, notwithstanding the Claimant's formal Notice of Dispute delivered on October 14, 2021, which expressly requested the commencement of settlement discussions. The Respondent has maintained complete silence in the face of this notice.
8. The Claimant respectfully submits that the Centre has jurisdiction over this dispute and that the Tribunal, once constituted, should find in the Claimant's favor on the merits and award full compensation for the losses sustained.
II. THE PARTIES
A. The Claimant
9. The Claimant in these proceedings is Dunmore Energy Holdings Ltd. ("DEH"), an exempted company duly incorporated and existing under the laws of the Cayman Islands.
10. DEH's registered office is located at 4th Floor, Harbour Place, 103 South Church Street, George Town, Grand Cayman KY1-1002, Cayman Islands. The company maintains its principal business office at 27 Curzon Street, London W1J 5HT, United Kingdom, from where it conducts the majority of its strategic, financial, and operational management activities.
11. DEH is engaged in the business of oil and gas exploration, production, and renewable energy development. Since its incorporation, DEH has focused on the acquisition and development of upstream hydrocarbon assets in emerging markets, with a particular emphasis on the Caribbean basin and Latin American region. Prior to the expropriation giving rise to this dispute, DEH's principal producing asset was the Bloque Orinoco Sur concession in the Republic of Valderia, which formed the core of the company's asset portfolio and revenue base.
12. The key principals of DEH are as follows:
(a) Sir Malcolm Dunmore, KBE — Founder and Chairman of the Board of Directors. Sir Malcolm is a British national who founded DEH in 2011 with the objective of building a portfolio of upstream oil and gas assets in the Caribbean basin. Sir Malcolm holds approximately 62% of the equity in DEH through the Dunmore Family Trust, a trust established under the laws of Jersey, Channel Islands. Sir Malcolm has over 35 years of experience in the international oil and gas industry, having previously served as a senior executive at several major international oil companies.
(b) Priya Nandakumar — Chief Executive Officer. Ms. Nandakumar is a dual British-Indian national who was appointed as CEO of DEH in 2015. She holds approximately 8% of the equity in DEH. Ms. Nandakumar holds a degree in petroleum engineering from Imperial College London and an MBA from INSEAD. She previously served as a vice president at a major international oil company and was responsible for overseeing the operational development of the Bloque Orinoco Sur concession during its critical development and production phases.
(c) Thomas Rearden — Chief Financial Officer. Mr. Rearden is a British national who joined DEH in 2014. He holds approximately 4% of the equity in DEH. Mr. Rearden is a chartered accountant and a former managing director at Galloway Merchant Bank, a London-based investment bank, where he specialized in energy sector financings and advisory mandates in emerging markets.
13. In addition to the equity held by the principals described above, approximately 26% of the equity in DEH is held by Meridian Growth Partners Fund III, L.P., a Cayman Islands limited partnership managed by Meridian Growth Partners LLC, a Delaware-based private equity firm specializing in energy sector investments. Meridian Growth Partners Fund III, L.P. made its initial investment in DEH in 2014 to support the exploration and development of the Bloque Orinoco Sur concession.
14. For purposes of the jurisdiction of the Centre and the protections afforded by the UK-Valderia BIT, DEH is incorporated in the Cayman Islands, which is a British Overseas Territory. The UK-Valderia BIT extends to the Cayman Islands by virtue of the United Kingdom's territorial extension declaration dated February 14, 2007, a copy of which is attached as part of Annex 3 to this Request. DEH therefore qualifies as a "company" of the United Kingdom within the meaning of Article 1 of the Treaty and as a "national of another Contracting State" within the meaning of Article 25(2)(b) of the ICSID Convention.
B. The Claimant's Valderian Subsidiary
15. DEH conducted its investment activities in the Republic of Valderia through its wholly-owned Valderian subsidiary, Dunmore Valderia upstream S.A. ("DVU"), a sociedad anónima duly incorporated and existing under the laws of the Republic of Valderia.
16. DVU's registered office is located at Avenida Libertador 1480, Piso 12, Puerto Valdés, Valderia. DVU was incorporated in 2012 for the specific purpose of holding and operating the Bloque Orinoco Sur concession. DVU is 100% owned by DEH (Cayman Islands), and at all material times served as the named concessionaire under Concession No. HYD-2012-047.
17. DVU employed approximately 285 Valderian nationals and 42 expatriate staff at the time of the expropriation. Following the military occupation of the concession assets in May 2021 and the subsequent revocation of DVU's operating licenses in August 2021, DVU's operations were effectively terminated, and the company was rendered inoperative.
C. The Respondent
18. The Respondent in these proceedings is the Republic of Valderia, a sovereign state and unitary presidential republic located in the Caribbean basin, with its capital at Puerto Valdés.
19. The current Head of State is President Héctor Luján Montalvo, who was inaugurated on January 15, 2020, following general elections held in November 2019. President Montalvo's administration has been responsible for the adoption and implementation of the expropriatory measures at issue in this dispute.
20. The relevant government officials and institutions of the Republic of Valderia include the following:
(a) Claudia Ríos Salazar — Minister of Energy and Natural Resources. Minister Ríos Salazar is responsible for the administration and regulation of the Valderian hydrocarbon sector, including the grant, supervision, and revocation of hydrocarbon concessions under the Valderian Hydrocarbons Law of 2009. Minister Ríos Salazar issued the Notice of Review of all foreign-held hydrocarbon concessions on March 2, 2021, and signed Ministerial Resolution No. MEN-2021-089 revoking DVU's operating licenses on August 5, 2021.
(b) Ambassador Diego Fuentes Castillo — Minister of Foreign Affairs. Ambassador Fuentes Castillo is the addressee for notices under international treaties to which the Republic of Valderia is a party, including the UK-Valderia BIT.
(c) Dr. Renata Villamizar Ochoa — Attorney General. Dr. Villamizar Ochoa is responsible for the legal representation of the Republic of Valderia. She ordered the freezing of DVU's bank accounts at Banco Nacional de Valderia on September 1, 2021.
(d) PetroValderia S.A. — The 100% state-owned national oil company of the Republic of Valderia. PetroValderia assumed operational control of the Claimant's concession assets following the expropriation decrees. Prior to the expropriation, PetroValderia held a 10% carried interest in the Bloque Orinoco Sur concession under the original concession terms. PetroValderia is an instrumentality of the Valderian State, wholly owned by the Valderian Treasury, and its actions in occupying and operating the concession assets are attributable to the Respondent under international law.
21. Both the United Kingdom of Great Britain and Northern Ireland (acting on behalf of its Overseas Territories, including the Cayman Islands) and the Republic of Valderia are Contracting States to the ICSID Convention. The United Kingdom signed the ICSID Convention on May 26, 1965, and the Convention entered into force for the United Kingdom on January 18, 1967. The Republic of Valderia signed the ICSID Convention on March 3, 1993, and the Convention entered into force for Valderia on April 2, 1993.
D. Claimant's Legal Representatives
22. The Claimant is represented in these proceedings by the following legal counsel:
Lead Counsel:
Calderwood & Harkness LLP 55 Bishopsgate London EC2N 3AH United Kingdom Telephone: +44 (0)20 7946 0000 Facsimile: +44 (0)20 7946 0001
• Vivienne St. Claire — Responsible Partner (v.stclaire@calderwoodharkness.com)
• Robert Adeyemi — Billing Partner (r.adeyemi@calderwoodharkness.com)
• Jeffrey Park — Lead Associate (j.park@calderwoodharkness.com)
• Audrey Zhou — Working Associate (a.zhou@calderwoodharkness.com)
Local Valderian Counsel:
Castaño Herrera & Asociados Calle Bolívar 742, Torre Empresarial, Piso 8 Puerto Valdés, Valderia Telephone: +598 (2) 412 7700 Facsimile: +598 (2) 412 7701
• Dr. Gabriel Castaño Herrera — Lead Partner (gcastano@castanoherrera.com.vd)
• Lic. Isabella Montoya Ruiz — Associate (imontoya@castanoherrera.com.vd)
23. All correspondence in connection with these proceedings should be addressed to Vivienne St. Claire at Calderwood & Harkness LLP at the address set forth above. The Claimant's Power of Attorney authorizing Calderwood & Harkness LLP to act on behalf of DEH in these proceedings is attached as Annex 12 to this Request.
III. JURISDICTION
24. The Claimant respectfully submits that the Centre has jurisdiction over this dispute and that the dispute is within the competence of a Tribunal constituted under the ICSID Convention. Each of the jurisdictional requirements under Article 25 of the ICSID Convention and Article 8 of the UK-Valderia BIT is satisfied, as set forth below.
A. Consent to ICSID Arbitration
25. Article 8 of the UK-Valderia BIT provides for the submission of investment disputes between a national or company of one Contracting Party and the other Contracting Party to international arbitration, including arbitration under the ICSID Convention. Article 8(1) of the Treaty provides, in relevant part:
"Each Contracting Party hereby consents to submit to the International Centre for the Settlement of Investment Disputes (hereinafter referred to as 'the Centre') for settlement by arbitration under the Convention on the Settlement of Investment Disputes between States and Nationals of other States ... any legal dispute arising between that Contracting Party and a national or company of the other Contracting Party concerning an investment of the latter in the territory of the former."
26. The Republic of Valderia consented to ICSID arbitration by virtue of Article 8 of the Treaty. This constitutes the Respondent's standing offer of consent to arbitration, which has been perfected by the Claimant's acceptance through the filing of this Request. The consent so established is irrevocable and constitutes the written consent of the parties within the meaning of Article 25(1) of the ICSID Convention.
27. The Claimant hereby provides its written consent to submit the present dispute to ICSID arbitration in accordance with Article 25(1) of the ICSID Convention and Article 8 of the UK-Valderia BIT. The Claimant confirms that it has not submitted this dispute to any other forum for resolution and that, in accordance with Article 26 of the ICSID Convention, the submission of this dispute to ICSID arbitration is to the exclusion of any other remedy.
B. Ratione Personae — Nationality of the Claimant
28. Article 25(1) of the ICSID Convention provides that the jurisdiction of the Centre extends to legal disputes arising directly out of an investment between a Contracting State and a national of another Contracting State. Article 25(2)(b) defines a "national of another Contracting State" as including any juridical person that has the nationality of a Contracting State other than the State party to the dispute.
29. DEH is an exempted company incorporated under the laws of the Cayman Islands, a British Overseas Territory. The Cayman Islands is not itself a Contracting State to the ICSID Convention; however, the United Kingdom is a Contracting State, and the protections of the Convention extend to the Cayman Islands as an Overseas Territory of the United Kingdom.
30. The UK-Valderia BIT was signed on May 22, 2006, and entered into force on November 1, 2006. The Treaty defines "company" in Article 1(d) as follows:
"'companies' means: in respect of the United Kingdom: corporations, firms and associations incorporated or constituted under the law in force in any part of the United Kingdom or in any territory to which this Agreement is extended in accordance with the provisions of Article 12."
31. Article 12 of the Treaty provides that the Treaty may be extended to any territory for whose international relations the United Kingdom is responsible, by mutual agreement. On February 14, 2007, the United Kingdom made a formal territorial extension declaration extending the application of the UK-Valderia BIT to its Overseas Territories, including the Cayman Islands. A copy of this declaration is attached as part of Annex 3 to this Request.
32. By virtue of the territorial extension, DEH, as a company incorporated in the Cayman Islands, qualifies as a "company" of the United Kingdom within the meaning of Article 1(d) of the Treaty. Accordingly, DEH constitutes a "national of another Contracting State" under Article 25(2)(b) of the ICSID Convention. The ratione personae requirement is therefore satisfied.
33. The Respondent, the Republic of Valderia, is a Contracting State to the ICSID Convention, having signed the Convention on March 3, 1993, and the Convention having entered into force for Valderia on April 2, 1993. The ratione personae requirement is satisfied with respect to the Respondent as well.
C. Ratione Materiae — Protected Investment
34. Article 25(1) of the ICSID Convention requires that the dispute arise "directly out of an investment." The Convention does not define the term "investment," but the broad, asset-based definition in Article 1 of the UK-Valderia BIT provides the relevant framework.
35. Article 1(a) of the Treaty defines "investment" as:
"every kind of asset and in particular, though not exclusively, includes:
(i) movable and immovable property and any other property rights such as mortgages, liens or pledges;
(ii) shares in and stock and debentures of a company and any other form of participation in a company;
(iii) claims to money or to any performance under contract having a financial value;
(iv) intellectual property rights, goodwill, technical processes and know-how;
(v) business concessions conferred by law or under contract, including concessions to search for, cultivate, extract or exploit natural resources."
36. DEH, through its wholly-owned Valderian subsidiary DVU, holds Concession No. HYD-2012-047 (Bloque Orinoco Sur), a 30-year oil and gas concession granted by the Ministry of Energy and Natural Resources of the Republic of Valderia on September 12, 2013, pursuant to the Valderian Hydrocarbons Law of 2009. The Claimant's investment in the concession constitutes a protected "investment" within the meaning of Article 1 of the Treaty, encompassing the following categories of assets:
(a) Concession rights — Rights to explore, develop, and exploit the hydrocarbon resources within the 1,240 km² Bloque Orinoco Sur concession area for a period of 30 years, falling within Article 1(a)(v) of the Treaty (business concessions conferred by law or under contract, including concessions to search for, cultivate, extract, or exploit natural resources);
(b) Movable and immovable property — Extensive physical assets including drilling equipment, the central processing facility CPF Orinoco Sur (with a design capacity of 35,000 barrels per day), a 68-kilometer gathering pipeline, surface infrastructure, and associated facilities, falling within Article 1(a)(i) of the Treaty;
(c) Shares and equity — 100% ownership of DVU, the Valderian sociedad anónima that served as the named concessionaire under the concession agreement, falling within Article 1(a)(ii) of the Treaty;
(d) Claims to money and contractual rights — Concession receivables, revenue entitlements, and rights under the senior secured project finance facility with Commonwealth Capital Bank plc, falling within Article 1(a)(iii) of the Treaty; and
(e) intellectual property and know-how — Proprietary seismic data covering 800 km² of 3D seismic acquisition, geological and geophysical studies, reservoir models, drilling data, and operational know-how developed over the course of nearly eight years of operations, falling within Article 1(a)(iv) of the Treaty.
37. The total capital invested by DEH in the Valderian concession between 2014 and 2021 amounts to approximately USD 347 million, comprising:
(a) USD 211 million in exploration and development drilling, including seven exploration wells and twenty-two development wells;
(b) USD 89 million in surface infrastructure and pipeline construction, including the CPF Orinoco Sur central processing facility and the 68-kilometer gathering pipeline; and
(c) USD 47 million in seismic acquisition and geological studies, including 3D seismic acquisition over 800 km².
38. The Claimant's investment satisfies the objective criteria commonly applied by ICSID tribunals for determining the existence of an "investment" within the meaning of the ICSID Convention: it involves a substantial commitment of capital; it was of significant duration (nearly eight years of active operations, with 23 years remaining on the concession term); it carried substantial risk; and it contributed to the economic development of the host State through the creation of employment, the payment of royalties and taxes, and the development of the Valderian hydrocarbon sector. The ratione materiae requirement is therefore satisfied.
D. Ratione Voluntatis — Compliance with Pre-Arbitral Requirements
39. Article 8 of the UK-Valderia BIT requires that the investor provide written notice of the dispute to the Contracting Party concerned and allow a cooling-off period of six months before submitting the dispute to ICSID arbitration. The purpose of this requirement is to afford the parties an opportunity to resolve the dispute amicably before resorting to international arbitration.
40. On October 14, 2021, DEH, acting through its legal counsel Calderwood & Harkness LLP, delivered a formal Notice of Dispute (the "Notice") to the Republic of Valderia, addressed to the Minister of Foreign Affairs, Ambassador Diego Fuentes Castillo, and the Attorney General, Dr. Renata Villamizar Ochoa, in accordance with the requirements of Article 8 of the Treaty. The Notice was delivered by international courier and by diplomatic channels. A copy of the Notice is attached as Annex 8 to this Request.
41. The Notice set forth in detail the factual and legal basis of the dispute, identified the specific measures giving rise to the dispute (including Presidential Decree No. 2021-0417, Presidential Decree No. 2021-0623, and Ministerial Resolution No. MEN-2021-089), and expressly invited the Republic of Valderia to enter into consultations with a view to reaching an amicable resolution of the dispute.
42. Despite the clear terms of the Notice and the Claimant's express willingness to engage in settlement discussions, the Republic of Valderia failed to respond to the Notice, failed to propose or engage in any negotiations, and failed to offer any compensation for the expropriation of the Claimant's investment. The six-month cooling-off period prescribed by Article 8 of the Treaty expired on April 14, 2022, without the dispute having been resolved through amicable settlement or any other means.
43. The Claimant has fully complied with all pre-arbitral procedural requirements under the UK-Valderia BIT, and the ratione voluntatis requirement for submission of the dispute to ICSID arbitration is therefore satisfied.
IV. FACTUAL BACKGROUND
44. The factual background set forth below provides a summary of the key events relevant to this dispute. The Claimant reserves its right to supplement and develop the factual record in its Memorial and at any evidentiary hearing.
A. The Concession
45. The concession at the center of this dispute is designated Bloque Orinoco Sur (Block Orinoco South), bearing Concession No. HYD-2012-047. The concession was granted by the Ministry of Energy and Natural Resources of the Republic of Valderia on September 12, 2013, pursuant to the Valderian Hydrocarbons Law of 2009 (the "Hydrocarbons Law"), which governs the exploration, development, and production of hydrocarbon resources within the territory of the Republic of Valderia.
46. The principal terms of the concession are as follows:
47. The concession agreement was the product of an open and competitive international bidding process conducted by the Ministry of Energy and Natural Resources in 2012–2013, in which DVU (on behalf of DEH) was selected as the successful bidder based on its technical and financial qualifications, its proposed work program, and the fiscal terms offered. The concession agreement established a comprehensive regulatory framework governing the rights and obligations of the concessionaire with respect to exploration, development, production, transportation, and decommissioning of hydrocarbon resources within the concession area. A copy of the concession agreement is attached as Annex 4 to this Request.
48. At the time of the grant, the Valderian government actively encouraged foreign investment in the hydrocarbon sector as a cornerstone of its economic development strategy. The Hydrocarbons Law of 2009 was enacted specifically to provide a modern, predictable, and investor-friendly legal framework for the sector, and the Republic of Valderia promoted Bloque Orinoco Sur and other concession areas at international energy conferences and through diplomatic channels.
B. DEH's Investment and Operational History
49. Following the award of the concession, DEH, through DVU, proceeded to invest substantial capital and resources in the exploration, development, and production of hydrocarbon resources within Bloque Orinoco Sur. The investment proceeded through three principal phases, as described below.
1. Exploration Phase (2013–2016)
50. During the exploration phase, DVU undertook comprehensive geological and geophysical surveys and drilling operations to assess the hydrocarbon potential of the concession area. The key activities during this phase included:
(a) 3D seismic acquisition over approximately 800 km² of the 1,240 km² concession area. This campaign, conducted between 2014 and 2015, produced a detailed subsurface imaging dataset that enabled the identification and mapping of prospective geological structures and reservoir targets within the concession area. The seismic data was acquired by DVU's subcontractor, Geophysical Solutions International Ltd. (Houston, Texas), and processed and interpreted by DVU's in-house geosciences team.
(b) Exploration drilling of seven exploration wells, five of which proved commercially viable and demonstrated the presence of significant hydrocarbon accumulations in multiple reservoir intervals within the Bloque Orinoco Sur concession area. The two unsuccessful wells encountered non-commercial quantities of hydrocarbons and were plugged and abandoned in accordance with Valderian regulations.
(c) Geological and engineering studies to characterize the reservoir, estimate in-place and recoverable resource volumes, and develop a field development plan for the transition from exploration to development and production.
51. Total expenditure during the exploration phase amounted to approximately USD 47 million, invested primarily in seismic acquisition, exploration drilling, and associated geological and engineering studies. This investment was funded through a combination of DEH equity capital and the equity contribution of Meridian Growth Partners Fund III, L.P.
2. Development Phase (2016–2019)
52. Following the successful exploration phase, DVU embarked on an aggressive development program to bring the discovered hydrocarbon resources into commercial production. The development phase involved the following principal activities:
(a) Development drilling of twenty-two development wells across the proven reservoir structures identified during the exploration phase. The wells were drilled and completed using modern directional drilling techniques and wellbore completion technologies to maximize production rates and ultimate recovery.
(b) Construction of the gathering pipeline — a 68-kilometer, 12-inch diameter steel pipeline connecting the wellheads and satellite facilities to the central processing facility. The pipeline was designed, constructed, and commissioned to transport produced fluids (crude oil, associated gas, and produced water) from the field to the CPF for processing and export.
(c) Construction of the Central Processing Facility ("CPF Orinoco Sur") — a state-of-the-art oil and gas processing facility with a design capacity of 35,000 barrels per day. The CPF included crude oil separation and treatment units, produced water treatment and injection facilities, gas compression and flaring facilities, crude oil storage tanks, and a metering and export terminal. The CPF was designed and constructed by a consortium led by Valderian and international engineering contractors, and was commissioned in early 2019.
(d) Supporting infrastructure — including access roads, power generation facilities, telecommunications systems, accommodation camps, and environmental management facilities.
53. Total capital expenditure during the development phase amounted to approximately USD 300 million, comprising USD 211 million in exploration and development drilling (inclusive of the exploration phase expenditure) and USD 89 million in surface infrastructure and pipeline construction. To fund the development phase, DVU entered into a senior secured project finance facility of USD 175 million with Commonwealth Capital Bank plc (London) on March 20, 2016. The facility was structured as a senior secured term loan with DVU as borrower and DEH as guarantor, bearing interest at a rate of SOFR + 4.25% per annum, and maturing on March 20, 2026. The facility was secured by, inter alia, DVU's concession rights, the physical assets of the Bloque Orinoco Sur project, and a pledge of DEH's shares in DVU. A copy of the facility agreement is attached as Annex 11 to this Request.
3. Production Phase (2019–2021)
54. The Bloque Orinoco Sur concession entered into commercial production in early 2019 following the commissioning of the CPF Orinoco Sur. Production ramped up steadily throughout 2019 and 2020, achieving the following milestones:
(a) Peak production: 24,800 barrels per day, achieved in September 2020.
(b) Average production FY2020: 21,200 barrels per day.
(c) FY2020 gross revenue from Valderian operations: USD 128.6 million.
(d) FY2020 EBITDA: USD 41.3 million.
(e) Proved reserves as of December 31, 2020: 87.4 million barrels of oil equivalent ("mmboe"), as independently certified by Ridgewell Subsurface Consultants Ltd. (Calgary, Alberta, Canada), a leading international petroleum engineering and reserves evaluation firm. A copy of the reserve certification report is attached as Annex 9 to this Request.
(f) Probable reserves: An additional 42.1 mmboe, indicating significant upside potential for future development and production beyond the proved reserves base.
(g) Production at the time of expropriation (April 2021): Approximately 18,600 barrels per day. Production had declined from the September 2020 peak primarily due to planned well workovers and natural decline, but was expected to recover and stabilize at approximately 20,000–22,000 barrels per day following the completion of a scheduled infill drilling campaign that was interrupted by the expropriation.
55. The audited financial statements of DVU for fiscal year 2020, prepared by Ashworth & Palliser LLP (London), DEH's corporate auditors, reflect the commercial success of the concession and the substantial value of the investment. A copy of these financial statements is attached as Annex 10 to this Request.
56. By the time of the expropriation in April–May 2021, DVU was a profitable, well-managed, commercially productive enterprise that was generating significant revenues for its shareholders and making substantial contributions to the Valderian economy through the payment of royalties, corporate income taxes, employment of Valderian nationals, and procurement of goods and services from local suppliers.
C. The Expropriation — Chronology of Events
57. The expropriation of the Claimant's investment was effected through a coordinated series of governmental actions taken between March and September 2021. The Claimant sets forth below a chronological account of the principal events constituting and surrounding the expropriation.
1. Political Background
58. On January 15, 2020, President Héctor Luján Montalvo was inaugurated as President of the Republic of Valderia following his victory in the November 2019 general elections. President Montalvo's campaign platform was built around the concept of "resource sovereignty" (soberanía de los recursos) and the reassertion of state control over the hydrocarbon sector. Throughout his campaign, President Montalvo publicly criticized the participation of foreign companies in the Valderian oil and gas industry and pledged to "reclaim the nation's patrimony" by placing strategic hydrocarbon assets under the exclusive control of PetroValderia S.A., the state-owned national oil company.
59. Following his inauguration, President Montalvo appointed Claudia Ríos Salazar as Minister of Energy and Natural Resources, a position from which she oversaw the implementation of the government's resource sovereignty agenda. Minister Ríos Salazar had previously served as an advisor to PetroValderia and was widely regarded as a proponent of full state control over the hydrocarbon sector.
2. Notice of Review (March 2, 2021)
60. On March 2, 2021, the Ministry of Energy and Natural Resources, under Minister Ríos Salazar, issued a formal "Notice of Review" (Aviso de Revisión) addressed to all holders of foreign-held hydrocarbon concessions in the Republic of Valderia. The Notice of Review announced the government's intention to conduct a comprehensive review of all existing hydrocarbon concessions held by foreign investors, ostensibly to assess compliance with the terms and conditions of the concession agreements and the Hydrocarbons Law. The Notice stated that the review would be completed within 90 days.
61. The Notice of Review was received by DVU at its registered office in Puerto Valdés on March 4, 2021. DVU promptly acknowledged receipt and expressed its willingness to cooperate fully with the review process. DEH, through its CEO Priya Nandakumar and its legal counsel, sought meetings with the Ministry to discuss the scope and methodology of the review, but these requests were not granted.
3. Presidential Decree No. 2021-0417 — Nationalization (April 17, 2021)
62. On April 17, 2021 — barely six weeks after the issuance of the Notice of Review, and well before the expiry of the 90-day review period announced therein — President Montalvo issued Presidential Decree No. 2021-0417, titled "Decreto sobre la Nacionalización de Activos Estratégicos de Hidrocarburos" ("Decree on the Nationalization of Strategic Hydrocarbon Assets"). The Decree declared the immediate nationalization of all strategic hydrocarbon assets held by foreign investors in the Republic of Valderia, including, expressly, Concession No. HYD-2012-047 (Bloque Orinoco Sur).
63. The Decree was issued without any prior notice to DEH or DVU, without any consultation or negotiation, without any hearing or opportunity to respond, and without any offer or provision of compensation. The Decree was published in the Gaceta Oficial de la República de Valderia (Official Gazette) on April 18, 2021 and took immediate effect.
64. Presidential Decree No. 2021-0417 constitutes the principal expropriatory act giving rise to this dispute. A copy of the Decree (with certified English translation) is attached as Annex 5 to this Request.
4. Physical Occupation of CPF Orinoco Sur (May 3, 2021)
65. On May 3, 2021, approximately two weeks after the issuance of the nationalization decree, units of the Valderian armed forces, accompanied by personnel of PetroValderia S.A., arrived at the CPF Orinoco Sur and physically occupied the facility. The military personnel established a security perimeter around the facility and denied entry to all DEH and DVU employees and contractors.
66. The Claimant's local management team, led by DVU's country manager, attempted to communicate with the commanding officer of the military detachment to clarify the situation and request access to the facility to ensure safe shutdown procedures and environmental protections. These requests were refused. DVU's personnel were ordered to vacate the facility and the concession area immediately, and were informed that operational control of all assets within the concession had been transferred to PetroValderia.
67. PetroValderia personnel assumed full operational control of the CPF Orinoco Sur, the wellheads, the gathering pipeline, and all other physical infrastructure within the concession area. From that point forward, PetroValderia has continued to operate the concession assets and produce hydrocarbons from the Bloque Orinoco Sur concession without the consent, participation, or compensation of the Claimant.
5. Presidential Decree No. 2021-0623 — Transfer to PetroValderia (June 23, 2021)
68. On June 23, 2021, President Montalvo issued Presidential Decree No. 2021-0623, titled "Decreto sobre la Transferencia de Derechos de Concesión a PetroValderia S.A." ("Decree on the Transfer of Concession Rights to PetroValderia S.A."). This Decree formally transferred all rights, titles, and interests under Concession No. HYD-2012-047 from DVU to PetroValderia S.A. The transfer was declared to be immediate, unconditional, and without compensation.
69. The Decree effectively stripped DVU of all legal rights under the concession agreement and vested those rights exclusively in PetroValderia, thereby completing the legal dispossession that had been initiated by the nationalization decree and physically implemented by the military occupation. A copy of Presidential Decree No. 2021-0623 (with certified English translation) is attached as Annex 6 to this Request.
6. Ministerial Resolution No. MEN-2021-089 — License Revocation (August 5, 2021)
70. On August 5, 2021, Minister Ríos Salazar issued Ministerial Resolution No. MEN-2021-089, which formally revoked all operating licenses, permits, and authorizations held by DVU in connection with the Bloque Orinoco Sur concession. The Resolution stated that DVU's licenses were revoked on the grounds that the concession rights had been transferred to PetroValderia pursuant to Presidential Decree No. 2021-0623, and that DVU was no longer authorized to conduct any activities in the hydrocarbon sector in the Republic of Valderia.
71. The revocation was issued without any prior notice to DVU, without any administrative hearing, and without any right of appeal or judicial review. No compensation was offered or provided. A copy of Ministerial Resolution No. MEN-2021-089 (with certified English translation) is attached as Annex 7 to this Request.
7. Freezing of Bank Accounts (September 1, 2021)
72. On September 1, 2021, the Attorney General of the Republic of Valderia, Dr. Renata Villamizar Ochoa, issued an order directing Banco Nacional de Valderia to freeze all bank accounts held by DVU. The order was executed immediately, and DVU was deprived of access to its remaining in-country funds. At the time of the freeze, DVU's accounts at Banco Nacional de Valderia held approximately USD 6.8 million in operating funds.
73. The freezing of DVU's bank accounts made it impossible for DVU to meet its remaining financial obligations in Valderia, including obligations to local employees, suppliers, and creditors. It also prevented DVU from pursuing any legal remedies in the Valderian domestic courts, as DVU was unable to access the funds necessary to retain local counsel or pay court fees. The account freeze was imposed without any court order, without any allegation of wrongdoing by DVU, and without any legal process or opportunity to be heard.
8. Consequence for Project Finance
74. The expropriation of the concession assets and the transfer of operational control to PetroValderia had immediate and severe consequences for the senior secured project finance facility provided by Commonwealth Capital Bank plc.
75. On November 1, 2021, Commonwealth Capital Bank plc formally declared a technical default under Section 9.1(k) of the facility agreement, which provides for an event of default upon the expropriation, nationalization, or confiscation of all or a material portion of the assets securing the facility. At the time of the default declaration, the outstanding principal balance on the USD 175 million facility was USD 112,400,000.
76. Following extensive negotiations between DEH and Commonwealth Capital Bank plc, a standstill agreement was entered into on December 22, 2021, pursuant to which the bank agreed to refrain from exercising certain remedies and acceleration rights for a period of 12 months, subject to DEH's pursuit of the present arbitration and certain other conditions. The standstill agreement did not relieve DEH of its obligation to pay interest, which continued to accrue at the rate of SOFR + 4.25% per annum on the outstanding principal balance.
77. The financing costs arising from the expropriation, including accrued interest, standstill fees, legal and advisory costs, and the potential acceleration liability, form a significant component of the Claimant's consequential damages claim.
D. Pre-Arbitral Steps
78. Following the expropriation of the Claimant's investment, DEH took all steps required under the UK-Valderia BIT before submitting this dispute to ICSID arbitration.
79. On October 14, 2021, DEH, acting through Calderwood & Harkness LLP, delivered a formal Notice of Dispute to the Republic of Valderia in accordance with Article 8 of the UK-Valderia BIT. The Notice was addressed to the Minister of Foreign Affairs, Ambassador Diego Fuentes Castillo, and the Attorney General, Dr. Renata Villamizar Ochoa, and was delivered by international courier and through diplomatic channels. The Notice identified the expropriatory measures at issue, set forth the legal basis for DEH's claims under the Treaty, and invited the Republic of Valderia to enter into consultations with a view to reaching an amicable resolution of the dispute.
80. Despite the clear and detailed terms of the Notice, and despite the Claimant's repeated expressions of willingness to engage in good-faith negotiations, the Republic of Valderia offered no response, proposed no negotiations, and made no offer of compensation of any kind. The six-month cooling-off period prescribed by Article 8 of the Treaty expired on April 14, 2022, without the dispute having been resolved or any meaningful progress toward resolution having been made.
81. The Claimant has therefore fully complied with all pre-arbitral procedural requirements under the UK-Valderia BIT and is entitled to submit this dispute to ICSID arbitration.
V. LEGAL BASIS OF THE CLAIMS
82. The Claimant submits that the Respondent's measures, individually and cumulatively, constitute violations of the Republic of Valderia's obligations under the UK-Valderia BIT. The legal claims asserted by the Claimant are summarized below and will be developed in full in the Claimant's Memorial.
A. Expropriation in Violation of Article 5 of the UK-Valderia BIT
83. Article 5 of the UK-Valderia BIT provides, in relevant part:
"Investments of nationals or companies of either Contracting Party shall not be nationalised, expropriated or subjected to measures having effect equivalent to nationalisation or expropriation (hereinafter referred to as 'expropriation') in the territory of the other Contracting Party except for a public purpose related to the internal needs of that Party on a non-discriminatory basis and against prompt, adequate and effective compensation. Such compensation shall amount to the genuine value of the investment expropriated immediately before the expropriation or before the impending expropriation became public knowledge, whichever is the earlier, shall include interest at a normal commercial rate until the date of payment, shall be made without unreasonable delay, be effectively realisable and be freely transferable."
84. Article 5 thus permits expropriation only if four cumulative conditions are met: (i) the expropriation must be for a public purpose; (ii) it must be on a non-discriminatory basis; (iii) it must be in accordance with due process of law; and (iv) it must be accompanied by prompt, adequate, and effective compensation at the genuine value of the investment.
85. The Respondent's measures — Presidential Decree No. 2021-0417 (nationalization), Presidential Decree No. 2021-0623 (transfer to PetroValderia), and Ministerial Resolution No. MEN-2021-089 (license revocation) — individually and cumulatively constitute a direct expropriation of the Claimant's investment within the meaning of Article 5 of the Treaty. The nationalization decree expressly declared the taking of the Claimant's concession assets by the State. The transfer decree formally divested the Claimant of all rights under the concession. The license revocation eliminated any remaining legal basis for the Claimant's operations in the Republic of Valderia. The physical occupation of the CPF Orinoco Sur by Valderian military forces completed the deprivation of the Claimant's property rights.
86. None of the conditions required by Article 5 for a lawful expropriation were satisfied:
(a) No compensation: The expropriation was effected without any compensation whatsoever. No compensation has been offered, tendered, or paid at any time, despite the Claimant's formal Notice of Dispute and express requests for settlement discussions. The total absence of compensation constitutes a per se violation of the Treaty's compensation requirement.
(b) Discriminatory purpose and effect: The expropriatory measures specifically targeted foreign-held hydrocarbon concessions. The nationalization decree, by its terms, applied only to "strategic hydrocarbon assets held by foreign investors." Domestically-held concessions and PetroValderia's own operations were not affected. The measures were therefore discriminatory in both purpose and effect, in violation of the non-discrimination requirement of Article 5.
(c) Absence of due process: The Respondent provided no prior notice to DEH or DVU of the impending nationalization, no consultation, no hearing, and no opportunity to respond or to challenge the measures before any administrative or judicial body. The nationalization decree was issued just six weeks after the issuance of the Notice of Review, well before the 90-day review period had expired, and without any finding of non-compliance or other regulatory basis for the taking. The license revocation was issued without any administrative hearing or right of appeal. The freezing of DVU's bank accounts was ordered without any court order or allegation of wrongdoing. The entire sequence of measures was carried out in a manner that denied the Claimant any semblance of due process.
87. The Claimant reserves its right to develop additional arguments regarding the unlawfulness of the expropriation in its Memorial, including any arguments concerning the absence of a genuine public purpose for the taking.
B. Breach of Fair and Equitable Treatment Under Article 3 of the BIT
88. Article 3 of the UK-Valderia BIT provides, in relevant part:
"Investments of nationals or companies of each Contracting Party shall at all times be accorded fair and equitable treatment and shall enjoy full protection and security in the territory of the other Contracting Party."
89. The fair and equitable treatment ("FET") standard, as consistently interpreted by international investment tribunals, encompasses several substantive elements, including the protection of the investor's legitimate expectations, the prohibition of arbitrary and unreasonable measures, and the requirement of due process. The Respondent's conduct breached each of these elements.
90. Frustration of legitimate expectations. DEH made its investment in the Republic of Valderia in reliance on the 30-year concession granted by the Ministry of Energy and Natural Resources in 2013 and the stable, predictable, and investor-friendly regulatory framework provided by the Valderian Hydrocarbons Law of 2009. The concession agreement itself constituted a specific commitment by the Valderian State to respect DEH's (through DVU's) rights to explore, develop, and produce hydrocarbons within the concession area for a period of 30 years, subject to the concessionaire's compliance with the terms and conditions of the agreement. DEH invested USD 347 million in direct reliance on these commitments. The abrupt and wholesale abrogation of the concession, without notice or compensation, fundamentally and irreversibly frustrated the legitimate expectations on which DEH's investment was premised.
91. Arbitrary and unreasonable conduct. The series of presidential decrees and ministerial resolutions issued by the Respondent between April and August 2021 constituted arbitrary and unreasonable conduct inconsistent with the FET standard. The nationalization decree was issued without any prior regulatory finding of non-compliance, without any administrative process, and without any rational basis in law or fact. The purported "review" of foreign-held concessions announced in the Notice of Review of March 2, 2021 was never completed before the nationalization decree was issued on April 17, 2021. The measures were driven by political ideology — the President's "resource sovereignty" agenda — rather than by any legitimate regulatory or legal purpose.
92. Denial of due process. As described above, the Respondent denied the Claimant due process at every stage of the expropriation process. The nationalization and transfer decrees were issued without notice, hearing, or opportunity to respond. The license revocation was effected without any administrative hearing or right of appeal. The bank account freeze was ordered without a court order. The Respondent's complete failure to respond to the Claimant's Notice of Dispute further demonstrates its contempt for the procedural rights of the Claimant.
C. Breach of Full Protection and Security Under Article 3 of the BIT
93. Article 3 of the UK-Valderia BIT also requires the Respondent to provide "full protection and security" to covered investments. The full protection and security ("FPS") standard requires the host State to exercise due diligence in protecting the investor's physical assets and legal rights from interference by the State or by third parties.
94. The military occupation of CPF Orinoco Sur on May 3, 2021, by units of the Valderian armed forces, and the forcible denial of access to DEH and DVU personnel, constituted a clear and egregious breach of the physical protection component of the FPS standard. The Respondent's own armed forces physically seized the Claimant's assets and forcibly expelled the Claimant's personnel from the concession area. Far from protecting the Claimant's investment, the Respondent's armed forces were the very agents of the violation.
95. The freezing of DVU's bank accounts at Banco Nacional de Valderia on September 1, 2021, by order of the Attorney General, without any court order or legal basis, compounded this breach. The account freeze deprived DVU of access to its operating funds, rendered it unable to meet its financial obligations, and effectively paralyzed the company's ability to function as a going concern in the Republic of Valderia.
96. The Respondent's conduct constitutes a breach of its obligation to accord full protection and security to the Claimant's investment under Article 3 of the Treaty.